A farmer acting in person has successively persuaded the Court of Appeal to set aside an order of the Commercial Court made against him which granted permission to enforce an arbitration award under 66 of the Arbitration Act 1996.
The dispute concerned two contracts under which B was purported to have agreed to the sale and delivery of feed wheat to F. Both contracts incorporated the arbitration rules of the Agricultural Industries Confederation Ltd (“AIC”) in relation to the resolution of disputes.
B failed to deliver the full contractual quantity of wheat. F commenced arbitration proceedings before the AIC.
F served notice of appointment of their arbitrator and called on B to either agree for the arbitrator to act as sole arbitrator or to appoint his own. In response B stated that he consented to the suggested arbitrator in relation to one of the contracts subject to that arbitrator being independent. In relation to the other contract he disputed its existence and refused to accept any arbitration that concerned it.
F responded making comments in relation to both contracts, confirming that the sole arbitrator was independent but that it was up to B to either agree to his appointment or to appoint his own arbitrator. A further chaser prompted B to respond simply that in principle the named arbitrator was acceptable.
B then failed to take any further part in relation to the subsequent arbitration. A single Award was made which dealt with both contracts. The arbitrator held that both had been properly concluded and that B was in breach of both contracts. Damages were awarded to F.
B failed to make payment and F applied to the Court to enforce the Award as a Judgment. The order was made but B appealed. His appeal was dismissed.
Appealing against that decision to the Court of Appeal the farmer argued, in person, amongst other things, that he had not entered into the second contract and that the arbitrator had not had jurisdiction to hear the arbitration under both contracts together (assuming the second contract was held to be valid).
F argued that by consenting to the appointment of a single arbitrator B had participated in the arbitration and subsequently lost the right to challenge the arbitrator’s jurisdiction (any such application should have been made within 28 days).
The Court of Appeal on 25 June 2015 confirmed that a party that participates in the appointment of an arbitrator without qualification does take part in the arbitration proceedings. If B had in fact appointed the arbitrator in relation to both contracts he would have lost the right to challenge the arbitrator’s jurisdiction.
However, on the facts the Court held that B had not abandoned his initial objection to arbitration under the disputed contract by his one line confirmation that in principle the named arbitrator was acceptable. The correspondence was construed as being a response solely in relation to the agreed contract and that B’s initial objection to the disputed contract should stand.
He had therefore not taken part in the arbitration so far as it related to the disputed contract. The right to challenge the substantive jurisdiction of the arbitrator was accordingly not lost. The Court were of the view that B had some prospect of success at trial in demonstrating that the disputed contract had not been agreed and accordingly allowed the appeal and set aside the order permitting enforcement of the Award. The matter was remitted to the Commercial Court.
Where a single arbitration concerns disputes under two contracts with identical arbitration clauses following this Judgment a party may be able to remain a non-participant under one contract (the contract which is disputed) provided there are reasonable prospects of success of demonstrating the contract was not agreed whilst at the same time as having been held to participate with respect to the other contract through agreeing to the appointment of an arbitrator. In those circumstances any Award covering both contracts may be open to subsequent challenge (and the usual 28 day time limit for challenging an arbitrator’s substantive jurisdiction would not run against the party challenging the Award). In cases of doubt, parties may wish to consider commencing separate arbitrations in relation to each contract to achieve greater certainty.